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Asset Swap Workshop, (One Day)

This is a one-day workshop explaining how swaps and fixed income securities are combined to create asset swap packages. The workshop will cover:

How swaps and bonds are combined
How they are valued
Up-front payments
Mark-to-market valuations
Selected pricing screens

Training will be in a workshop format. This will include a mixture of presentation and case study material. The course is designed for up to ten staff.

Below is a summary of the workshop. The content has been placed in a logical sequence and addresses the pricing, structuring and risks associated with asset swaps.

Morning

Introduction

Present value techniques

Interest rate swaps

What they are
How they are used
Day count conventions
Pricing
Basis point value
Practical example

Fixed income securities

Cash flow structure
How they are valued
Bonds that are suitable for asset swapping

Combining swaps & bonds

Par/par asset swaps: what they are, how they are structured, why clients prefer par/par structures
What happens when a bond is at a premium, the up-front payments and additional credit risks
What happens when a bond is at a discount, the up-front payments and additional credit risks
Practical examples

Comparison with FRNs

Discount margin calculation
Practical example

Afternoon

Assets swaps - advantages for clients

Increased return

Asset swaps - disadvantages for clients

Reduction in liquidity

Valuation of the asset swap

Mark-to-market values of the bond and swap
Understanding how values change
Practical example

The risks associated with an asset swap package

Credit exposures on the bond
Credit exposure on the swap, how you get them, how you measure them, how they change and how they can be mitigated

Asset swapping non-vanilla bonds

Callable and puttable structures

Heading	Data
Heading	Data

End of workshop & review

Related Documents

elearning > Asset swaps

Learn about the following: How asset swaps work. Why investors use asset swaps. Par/par structures. The risks asset swaps produce.

Training Courses > Debt Markets

Training Courses > Interest Rate & Currency Swaps

Market Guides > Interest rate swaps

20th September 2009

When two parties agree to enter an interest rate swap (IRS) one party pays a fixed rate of interest and the other a variable rate. The variable rate is often referenced to Libor or Euribor. The interest payments are based on a notional amount, (with IRS no principal amount changes hands). In the market there are conventions for calculating the interest payments. For example USD IRS use an annual actual 360 interest rate calculation for the fixed payment and a quarterly or semi annual actual 360 calculation for the floating payment. Maturities are normally between 2 and 20 years but it is possible to trade swaps that have maturities exceeding 50 years. Customers using swaps to hedge can expect a dealer to quote a dealing spread. The dealer will want to receive a higher fixed rate than the one they pay. It's one way the dealer makes money from trading. Dealers will insist before trading that the appropriate documentation is signed. For swaps standard documentation is provided by the International Swaps and Derivatives Association (ISDA). This document is called a master agreement. It covers all swaps between the two parties. Individual transactions are then agreed by confirmation which refers to the master agreement.